<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
____
Quarterly Report Pursuant to Section 13 or 15(d)
____ Of the Securities Exchange Act
of 1934
Commission
For the Quarterly Period Ended September 30, 1994 File Number 1-1063
------------------ -------
Dana Corporation
- - - - --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Virginia 34-4361040
- - - - --------------------------------- ----------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
4500 Dorr Street, Toledo, Ohio 43615
- - - - ---------------------------------------- ----------------------------------
(Address of Principal Executive Offices) (Zip Code)
(419) 535-4500
- - - - ----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1994
- - - - ------------------------------- ----------------------------------
Common stock of $1 par value 98,774,698
<PAGE> 2
DANA CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Cover 1
Index 2
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheet
December 31, 1993 and
September 30, 1994 3
Statement of Income
Three and Nine Months Ended
September 30, 1993 and 1994 4
Condensed Statement of Cash Flows
Nine Months Ended
September 30, 1993 and 1994 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7 - 12
Part II. Other Information
Item 1. Legal Proceedings 13 - 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. DANA CORPORATION
CONDENSED BALANCE SHEET (Unaudited)
(in Millions)
<TABLE>
<CAPTION>
December 31, September 30,
Assets 1993 1994
------ ------------- -------------
<S> <C> <C>
Cash $ 49.5 $ 20.8
Marketable Securities, at Cost
Which Approximates Market 28.1 45.9
Accounts Receivable, Less
Allowance for Doubtful Accounts 790.5 1,001.5
Inventories
Raw Materials 141.8 183.3
Work in Process and Finished Goods 508.1 521.3
Lease Financing 849.3 922.2
Investments and Other Assets 846.3 772.3
Deferred Income Tax Benefits 276.2 240.1
Property, Plant and Equipment 2,529.3 2,729.5
Less - Accumulated Depreciation (1,387.2) (1,457.7)
-------- --------
Total Assets $4,631.9 $4,979.2
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Short-Term Debt $ 474.1 $ 598.0
Accounts Payable 310.6 376.5
Other Liabilities 684.7 781.6
Deferred Employee Benefits 1,011.5 1,023.0
Long-Term Debt 1,207.4 1,125.9
Minority Interest 142.2 152.4
Shareholders' Equity 801.4 921.8
-------- --------
Total Liabilities and
Shareholders' Equity $4,631.9 $4,979.2
======== ========
</TABLE>
3
<PAGE> 4
ITEM 1. (Continued)
DANA CORPORATION
STATEMENT OF INCOME (Unaudited)
(in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
--------------------------- -----------------------------------
1993 1994 1993 1994
--------------------- ---------------------------- ----
As Reported As Restated
----------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $1,290.7 $1,609.4 $4,032.5 $4,032.5 $4,918.7
Revenue from Financial Holdings
and Other Income 33.5 38.6 100.9 100.9 109.9
Foreign Currency Adjustments (7.5) (0.8) (22.2) (22.2) (24.3)
-------- -------- -------- -------- --------
1,316.7 1,647.2 4,111.2 4,111.2 5,004.3
-------- -------- -------- -------- --------
Cost of Sales 1,094.6 1,370.0 3,430.8 3,430.8 4,156.9
Restructuring Charges 1.4 5.4 12.3 12.3 13.2
Selling, General and
Administrative Expenses 131.9 150.7 398.2 398.2 457.6
Interest Expense 31.3 28.3 106.3 106.3 83.0
-------- -------- -------- -------- --------
1,259.2 1,554.4 3,947.6 3,947.6 4,710.7
-------- -------- -------- -------- --------
Income Before Income Taxes 57.5 92.8 163.6 163.6 293.6
Estimated Taxes on Income 19.3 37.7 64.6 64.6 124.2
-------- -------- -------- -------- --------
Income Before Minority Interest
and Equity in Earnings of
Affiliates 38.2 55.1 99.0 99.0 169.4
Minority Interest (8.1) (8.0) (17.4) (17.4) (18.5)
Equity in Earnings of Affiliates 3.2 5.8 11.7 11.7 17.7
-------- -------- -------- -------- --------
Income Before Effect of a
Change in Accounting Principle 33.3 52.9 93.3 93.3 168.6
Effect on Prior Years of the
Change in Accounting for
Postemployment Benefits (48.9)
-------- -------- -------- -------- --------
Net Income $ 33.3 $ 52.9 $ 93.3 $ 44.4 $ 168.6
======== ======== ======== ======== ========
Net Income Per Common Share
Before Effect of a Change
in Accounting Principle $ .36 $ .54 $ 1.01 $ 1.01 $ 1.71
Effect on Prior Years of the
Change in Accounting for
Postemployment Benefits (.53)
----- ----- ----- ----- ------
Net Income Per Common Share $ .36 $ .54 $ 1.01 $ .48 $ 1.71
===== ===== ====== ===== ======
Dividends Declared and Paid per
Common Share $ .20 $ .21 $ .60 $ .60 $.62
===== ===== ===== ===== =====
Average Number of Shares
Outstanding 92.2 98.7 92.2 92.2 98.7
</TABLE>
4
<PAGE> 5
ITEM 1. (Continued)
DANA CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
(in Millions)
<TABLE>
<CAPTION>
Nine Months Ended September 30
---------------------------------
1993 1994
---- ----
<S> <C> <C>
Net Income $ 44.4 $ 168.6
Effect on Prior Years of the Change in
Accounting for Postemployment Benefits 48.9
Depreciation and Amortization 143.1 152.7
Net Change in Receivables, Inventory and Payables 75.4 (60.7)
Other 50.6 33.2
------- -------
Net Cash Flows from Operating Activities 362.4 293.8
------- -------
Purchases of Property, Plant and Equipment (142.0) (176.9)
Net Cash Flows-Leasing Activities (28.9) (117.9)
Net Cash Flows-Lending Activities (17.8) 5.2
Other (11.9) 5.3
------- -------
Net Cash Flows-Investing Activities (200.6) (284.3)
-------- --------
Net Change in Short-Term Debt (5.6) 113.6
Proceeds from Long-Term Debt 513.7 222.5
Payments on Long-Term Debt (612.6) (301.1)
Dividends Paid (55.3) (61.2)
Other 9.0 5.8
-------- -------
Net Cash Flows-Financing Activities (150.8) (20.4)
-------- --------
Net Change in Cash and Cash Equivalents $ 11.0 $ (10.9)
======== ========
</TABLE>
5
<PAGE> 6
ITEM 1 (Continued)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in Millions Except Per Share Amounts)
1. In the opinion of management, all normal recurring adjustments necessary
to a fair presentation of the results for the unaudited interim periods
have been included.
2. In accordance with generally accepted accounting principles, Dana's
wholly-owned financial subsidiary, Diamond Financial Holdings, Inc. (DFHI)
is included in the consolidated financial statements. The following is a
recap of the revenue, net income, total assets, total liabilities and
shareholder's equity of this subsidiary (unaudited):
DIAMOND FINANCIAL HOLDINGS, INC.
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
1993 1994 1993 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $41.5 $48.0 $120.8 $ 134.0
Net Income $ .2 $ 3.0 $ 4.1 $ 11.1
December 31, 1993 September 30, 1994
----------------- ------------------
Total Assets $1,310.3 $1,347.7
Total Liabilities 1,215.3 1,253.5
-------- --------
Shareholder's Equity $ 95.0 $ 94.2
======== ========
</TABLE>
Diamond Financial Holdings, Inc. third quarter 1993 net income was reduced
approximately $2 attributable primarily to the effect of the change in the
U.S. corporate income tax rate on deferred income tax liabilities.
3. Dana's third quarter 1993 net income included approximately $3 ($.03 per
share) of income tax benefit attributable primarily to the effect of the
change in the U.S. corporate income tax rate on deferred income tax
benefits.
4. In January 1994, Dana announced the adoption of Statement of Financial
Accounting Standards (SFAS) No. 112 "Employers' Accounting for
Postemployment Benefits," effective January 1, 1993. This accounting
change resulted in a one-time charge to first quarter 1993 net income of
$48.9 ($.53 per share). 1993 results of operations have been restated to
reflect adoption of SFAS 112.
5. On April 18, 1994, Dana's Board of Directors approved a two-for-one stock
split effective for stockholders of record on June 1, 1994. Share and per
share amounts have been restated to reflect the stock split.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
(in Millions)
Capital expenditures for property, plant and equipment were $177 for the
first nine months of 1994, compared to $142 for the first nine months of 1993.
This higher level of capital spending is attributable to an increased worldwide
demand for Dana products and the Company's ongoing commitment to productivity
and quality improvements. Capital expenditures for 1994 are currently
projected to be approximately $295 compared to actual expenditures of $178 for
1993.
Dana Corporation and its consolidated subsidiaries' (Dana) 1994 short-term
debt as of September 30, totaled $598, which is up $124 from year end 1993. A
significant portion of this increase offsets the reduction in long-term debt
over the same period as maturities of the long-term debt were replaced with new
short-term borrowings. Dana, excluding Diamond Financial Holdings, Inc. and
its consolidated subsidiaries (DFHI), funds its short-term debt through the
issuance of commercial paper and bank borrowings. To fund short-term working
capital requirements, Dana (excluding DFHI) has available $360 in committed
credit facilities to back up commercial paper issuance and $798 in uncommitted
lines for bank borrowings. At September 30, 1994, Dana's (excluding DFHI)
domestic and international short-term borrowings were $256, compared to $155 at
December 31, 1993. DFHI funds short-term domestic and international debt
through the issuance of commercial paper and bank borrowings. At September 30,
1994, DFHI had committed commercial paper back-up lines totaling $250 and
uncommitted bank lines amounting to $399. DFHI had a short-term debt position
of $342 at September 30, 1994, which was up $23 from year end 1993.
Dana's consolidated long-term debt was reduced to $1,126 at September 30,
1994, from $1,207 at December 31, 1993. This decrease offsets the majority of
the increase in short-term debt over the same period as the maturities of the
long-term debt were replaced with short-term borrowings. Dana's (excluding
DFHI) long term debt position at September 30, 1994 was $510, down from $658 at
year end 1993. On March 1, 1994, Dana redeemed at par the remaining $3 of its
5 7/8% debentures which carried an effective yield of 12.4%. DFHI's long term
debt at the end of the first nine months of 1994 was $616 as compared to $549
at December 31, 1993.
The Company's management evaluates its operations to identify
non-strategic and under-performing assets. Pursuant to these evaluations,
restructuring plans are developed which may result in abandonment,
consolidation or relocation of operations. Upon approval of these
strategies, estimated costs of implementation are charged to restructuring
expense and include employee benefits, losses on disposal of assets and other
expenses incidental to the restructuring activities. Of the restructuring
charges recorded in 1992, 1993 and 1994, the Company has remaining an accrued
liability of $31 at September 30, 1994, compared to $57 as of December 31,
1993. Of the $31 liability accrued at September 30, 1994, $23 is anticipated
to be settled in cash ($7 in 1994 and $16 in 1995). The balance of the
accrual is non-cash and will be utilized to write down the affected assets.
Dana's liquidity and cash flows will not be materially impacted by these
actions. It is anticipated that Dana's operations over the long term will
benefit from these realignment strategies.
7
<PAGE> 8
ITEM 2. Liquidity and Capital Resources (continued)
(in Millions)
Dana's management and legal counsel have reviewed the legal proceedings to
which the Company and its subsidiaries were parties as of September 30, 1994
(including, among others, those involving product liability claims and alleged
violations of environmental laws) and concluded that any liabilities that may
result from these proceedings are not likely to have a material effect on the
Company's liquidity, financial condition or results of operations. The Company
estimates its contingent environmental and product liabilities based upon the
most probable method of remediation or outcome considering currently enacted
laws and regulations and existing technology. Measurement of liabilities is
made on an undiscounted basis and excludes the effects of inflation and other
societal and economic factors. In those cases where there is a range of
equally probable remediation methods or outcomes, the Company accrues the
minimum liability, which at September 30, 1994, was $103 ($58 product
liability, $45 environmental) compared to $111 ($72 product liability, $39
environmental) at December 31, 1993. The difference between the minimum and
maximum contingent liabilities was less than $17 at September 30, 1994, and
December 31, 1993. Probable recoveries of $48 and $60, relating to these
liabilities, have been recorded at September 30, 1994, and December 31, 1993,
respectively. It is not anticipated that the timing of the cash flows for
these liabilities will have a material adverse effect on the liquidity of the
Company.
Dana anticipates that net cash flows from operating activities, along with
available financing capabilities, will be sufficient to meet its funding
requirements for 1994.
8
<PAGE> 9
ITEM 2. (Continued)
Results of Operations (Third Quarter 1994 vs Third Quarter 1993)
Dana's consolidated sales for the third quarter of 1994 were $1,609, up
$318 (25%) from $1,291 reported for the third quarter of 1993. The overall
sales gain reflects an increase of $232 (24%) in the U.S. and $86 (26%)
internationally. This sales growth is the result of overall unit volume
increases throughout Dana's worldwide markets and the effect of European
acquisitions. The acquisitions contributed $56 to the third quarter sales
increase, $11 of the U.S. and $45 of the international increases.
Dana continues to benefit from the strength experienced in the U.S.
vehicular original equipment (OE) market. Dana's sales to U.S. light truck
builders in the third quarter of 1994 was $404, an increase of nearly 24% over
1993's third quarter, and domestic sales of heavy truck OE products were $153,
up 58% over third quarter 1993's level.
Consolidated sales to the worldwide highway vehicle market, Dana's
largest, were $889, up 34% over the third quarter of 1993. U.S. sales to that
market increased 35% to $719, while international (primarily Canada and South
America) experienced a 30% growth in the third quarter of 1994 versus 1993.
Mobile off-highway OE sales were up 37%, reflecting continued improvement in
our North American agricultural and construction markets and the effect of a
European acquisition. Industrial OE component sales for the third quarter of
1994 were slightly higher than 1993's third quarter; gains in the U.S. were
partially offset by a weak European market which is only beginning to show
signs of improvement.
Dana's international sales increased 26% in the third quarter of 1994 to
$411 from $325 for the third quarter of 1993. This increase reflects the
contribution of European companies acquired in late 1993 and early 1994 and
continuing growth in South America.
The Company's distribution sales were improved in the third quarter of
1994 versus third quarter of 1993, with auto distribution up 11%, truck parts
distribution up 18% and mobile off-highway/industrial distribution up 13%.
These 1994 sales include the effect of European acquisitions and reflect
current strength in virtually all of Dana's global replacement parts markets.
Revenue from Financial Holdings and Other Income increased 15% to $39 in
the third quarter of 1994 due in part to higher leasing related revenue.
Foreign currency translation losses, which have been almost exclusively
related to the Company's Brazilian operations and the translation of the
Cruzeiro to U.S. Dollars, were $1 for the quarter ended September 30, 1994,
compared to $7 in the third quarter of 1993. During the third quarter of 1994,
Brazil introduced its new currency, the Real, and initially placed it in parity
with the U.S. Dollar. To the extent the value of the Real remains pegged to
the U.S. Dollar, foreign currency translation adjustments relating to Brazil
should be minimal.
Dana's gross margin in the third quarter of 1994 was nearly 15%, slightly
less than the third quarter of 1993. The decline was the result of a decrease
in the gross margin of the company's Brazilian operations, which is a direct
consequence of the introduction of that country's new currency. Despite the
decline, overall profit has not been significantly affected. If Dana's 1993
margins were adjusted for the impact of translation losses, making the
comparison more meaningful, 1994's third quarter margins would show an
improvement.
9
<PAGE> 10
ITEM 2. Results of Operations (Third Quarter 1994 vs Third Quarter 1993)
(continued)
(in Millions)
Restructuring charges for the period ending September 30, 1994, were $13
and include exit costs relating to people (health care, severance and
relocation) and the costs to close down and write off facilities.
Selling, general and administrative expenses (S,G & A) were $151 for the
quarter ended September 30, 1994, a 5% increase over the same period in 1993
after excluding the effect on S,G & A of acquisitions made in the latter half
of 1993 and early 1994. Higher business levels have contributed to the 5%
increase, although the ratio of expense to sales improved.
Interest expense decreased 10% to $28 in the third quarter of 1994 due to
lower overall interest rates and reduced weighted average debt levels. During
1993, higher interest rate notes and debentures were replaced with other
financing at lower rates and the 5 7/8% convertible debentures were converted
to stock.
Taxes on income in the third quarter of 1994 increased to $38 from $19 in
the same period of 1993 due to higher taxable income and inclusion in 1993 of
approximately $3 income tax benefit attributable primarily to the effect of the
change in the U.S. corporate income tax rate on deferred income tax benefits.
The effective tax rates were 41% and 34% in the third quarter of 1994 and 1993,
respectively, the difference principally due to the aforementioned 1993 tax
benefit.
Equity in earnings of affiliates increased to $6 from $3 due to improved
performances by the Company's affiliates in Venezuela and Mexico. Dana's
affiliate operation in Venezuela benefitted from strong export sales volume of
its products. Minority interest in net income of consolidated subsidiaries in
the third quarter of 1994 was slightly lower than for the same period of 1993.
10
<PAGE> 11
ITEM 2. Results of Operations (Nine Months 1994 vs. Nine Months 1993)
(in Millions)
Dana's consolidated sales for the nine months ended September 30, 1994,
were $4,919, up $887 (22%) from the $4,032 reported for the same period in
1993. The U.S. sales increased $670 (22%) over 1993's nine month level while
international sales increased $217 (22%) over the same period. The sales gain
is the result of unit volume increases throughout Dana's worldwide markets and
the effect of European acquisitions. The acquisitions contributed $157 to the
nine month sales increase, $33 of the U.S. and $124 of the international
increases.
Dana continues to benefit from the ongoing strength of the U.S. vehicular
original equipment market. Dana's sales to U.S. light truck builders in the
first nine months of 1994 were $1,290, an increase of 26% over 1993's nine
month level, and domestic sales of heavy truck OE products were $476, up nearly
40% over 1993's first nine months level.
Nine months 1994 consolidated sales to the worldwide highway vehicle
market, Dana's largest, were $2,775, up 28% over the same period in 1993. U.S.
sales to that market increased 29% to $1,755 while international sales
(primarily Canada and South America) experienced a 24% growth in the first nine
months of 1994 compared to the first nine months of 1993. Mobile off-highway
OE sales were up nearly 37%, reflecting continued improvement in the North
American agricultural and construction markets and the effect of a European
acquisition. Industrial OE component sales for the nine months ended September
30, 1994, were 2% lower compared to the same period of 1993, but improved over
the first and second quarter year-to-date comparisons to 1993; gains in the
U.S. were offset by a weak European market which is only beginning to show
signs of improvement.
Dana's international sales increased 22% for the first nine months of 1994
to $1,192 from $975 for the nine months ended September 30, 1993. This
increase reflects the contribution of European companies acquired in late 1993
and early 1994 and continuing growth in South America.
The Company's distribution sales continued to show increases in the first
nine months of 1994 compared to 1993, with auto distribution up 12%, truck
parts distribution up 15% and mobile off-highway/industrial distribution up 13%
over 1993's nine month levels. These 1994 sales include the effect of European
acquisitions and reflect strength in virtually all of Dana's global replacement
parts markets.
Revenue from Financial Holdings and Other Income increased 9% to $110 for
the period ended September 30, 1994, compared to the same period in 1993, due
to higher leasing related revenue.
Foreign currency translation losses were $24 for year-to-date 1994, as
compared to $22 in 1993's first nine months. The increased losses are almost
exclusively related to Dana's Brazilian operations. A significantly lower
foreign currency translation adjustment was reported in the third quarter of
1994 as Brazil's new currency was introduced at parity with the U.S. Dollar.
To the extent the value of the new currency remains pegged to the U.S. Dollar,
future foreign currency translation adjustments relating to Brazil should be
minimal.
Dana's gross margin for the first nine months of 1994 was over 15%
compared to slightly less than 15% for the same period in 1993. This improved
gross margin is principally the result of the performance of Dana's North
American operations which is benefiting from higher sales volumes and
productivity improvements. If Dana's 1993 margins were adjusted for the impact
of the Brazilian currency realignment, making the comparison more meaningful,
1994's gross margin would show an even greater improvement over the same nine
months of 1993.
11
<PAGE> 12
ITEM 2. Results of Operations (Nine Months 1994 vs Nine Months 1993)
(continued)
(in Millions)
Restructuring charges ending September 30, 1994, were $13 and included
exit costs relating to people (health care, severance and relocation) and the
costs to close down and write off facilities.
Selling, general and administrative expenses (S,G & A) were $458 for the
first nine months of 1994, a 3% increase over the same period in 1993 after
excluding the effect on S,G & A of acquisitions made in the latter half of 1993
and early 1994. Higher business levels have contributed to the 3% increase,
although the ratio of expense to sales continues to improve.
Interest expense decreased 22% to $83 for the first nine months of 1994,
compared to the same period in 1993, due to lower overall interest rates and
reduced weighted average debt levels. During 1993, higher interest rate notes
and debentures were replaced with other financing at lower rates and the 5 7/8%
convertible debentures were converted to stock.
Taxes on income in the first nine months of 1994 increased to $124 from
$65 in the first nine months of 1993 due to higher taxable income and the
inclusion in 1993 of approximately $3 of income tax benefit attributable
primarily to the effect of the change in the U.S. corporate income tax rate on
deferred income tax benefits. The effective tax rate was 42% for the first
nine months of 1994 compared to 39% for the same period in 1993, the difference
primarily being the aforementioned tax benefit in 1993.
Equity in earnings of affiliates increased to $18 for the first nine months
of 1994 from $12 for the same period of 1993 due to improved performances by
the Company's affiliates in Korea and Venezuela. The improvement in the
performance of the company's affiliate in Korea is essentially related to the
turnaround in the local economy, while Dana's affiliate operation in Venezuela
benefitted from strong export sales volume of its products. Minority interest
in net income of consolidated subsidiaries increased in 1994 due to the
increased earnings of Dana's subsidiary in Canada.
Dana is experiencing strong demand for its vehicular products in North and
South America and a strong rebound in its mobile off-highway market.
Additionally, the Company is now seeing the beginnings of economic recovery in
Europe. The Company currently expects these trends to continue through 1995.
As a result of the strong sales volume and the Company's emphasis on
productivity, margins should be maintained. Dana will continue, as
opportunities become evident, to pursue further growth in all of its global
markets.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its consolidated subsidiaries are parties to various
pending judicial and administrative proceedings arising in the ordinary course
of business, including, among others, those involving product liability claims
and those involving alleged violations of various federal, state and local
environmental laws. Management has reviewed with legal counsel the probable
outcome of these pending legal proceedings, the costs and expenses reasonably
expected to be incurred, the availability and limits of the Company's insurance
coverage, and the Company's established reserves for uninsured liabilities.
While the outcome of these proceedings cannot be predicted with certainty,
management believes that the liabilities that may result are not reasonably
likely to have a material effect on the Company's liquidity, financial
condition or results of operations.
Under the rules of the Securities and Exchange Commission, certain
environmental proceedings are not deemed to be ordinary routine proceedings
incidental to the Company's business and are required to be reported. The
Company is a party to several such proceedings:
1. In the Matter of Dana Corporation-Victor Products Division and BRC
Rubber Group. The Company has previously reported this administrative
proceeding, in which the United States Environmental Protection Agency, Region
5 ("USEPA 5") sought civil penalties of $77,000 against Dana and $55,000
against the BRC Rubber Group ("BRC") for alleged violations of the federal
Resource Conservation and Recovery Act by the Company's former plant in
Churubusco, Indiana. In the third quarter, the administrative law judge ruled
on various pending motions for summary judgment. The effect of his rulings was
to retain Dana as a party to the proceeding and to dismiss BRC. The judge
also determined that the amount of the civil penalty to be assessed against
Dana remains in controversy, and the Company and USEPA 5 are presently
negotiating this matter.
2. Commissioner of the Department of Environmental Management v. Dana
Corporation, Sleeve Plant. On September 13, 1994, the Indiana Department of
Environmental Management ("IDEM") proposed a Consent Order to the Company in
connection with alleged violations of the federal Clean Water Act by the
Company's plant in Richmond, Indiana. The alleged violations are discharges
exceeding certain metal concentration limitations in the plant's water
discharge permit with the City of Richmond and discharges into a ditch in
violation of the plant's National Pollutant Discharge Elimination System
permit. In the proposed Consent Order, the IDEM seeks civil penalties in the
amount of $227,000. The Company is contesting certain of the allegations and
negotiating the proposed Consent Order with the IDEM.
13
<PAGE> 14
ITEM 1. LEGAL PROCEEDINGS (Continued)
3. In the Matter of Dana Corporation, Boston Weatherhead Division. On
September 27, 1994, the United States Environmental Protection Agency, Region 6
("USEPA 6") issued an administrative Complaint, Compliance Order and Notice of
Opportunity for Hearing to the Company in connection with various alleged
violations of the federal Resource Conservation and Recovery Act ("RCRA") by
the Company's plant in Vinita, Oklahoma. The alleged violations include, among
others, the plant's failure to manage and maintain hazardous waste containers,
tanks and tank systems in accordance with RCRA requirements and record keeping
violations in connection with the plant's Contingency Plan. In the Compliance
Order, USEPA 6 is seeking civil penalties of $576,640. The Company is
reviewing the allegations and a meeting is scheduled with USEPA 6 on this
matter in the fourth quarter.
There were no significant developments in the third quarter in the
previously reported case of United States v. Dana Corporation, a suit by the
U.S. Department of Justice alleging overcharging on eighteen government
contracts or subcontracts awarded in the 1980s to Beaver Precision Products,
Inc., a former subsidiary of a business acquired by the Company in 1985.
14
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) The Exhibit listed in the "Exhibit Index" is filed
as a part of this report
b) Reports on Form 8-K. The Company filed a report on Form
8-K on September 23, 1994, to report that its offer to
acquire approximately 47% of the shares of Kolbenschmidt
AG from Metallgesellschaft AG had expired without the
parties having reached an agreement.
15
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DANA CORPORATION
____________________________
Date: November 7, 1994 James E. Ayers
___________________ ____________________________
James E. Ayers
Chief Financial Officer
Vice President Finance and Treasurer
Duly Authorized Officer and
Principal Financial Officer.
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
- - - - ------- --------
<S> <C> <C>
27 Financial Data Schedule 18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 20,800
<SECURITIES> 45,900
<RECEIVABLES> 1,001,500
<ALLOWANCES> 21,200
<INVENTORY> 704,600
<CURRENT-ASSETS> 0
<PP&E> 2,729,500
<DEPRECIATION> 1,457,700
<TOTAL-ASSETS> 4,979,200
<CURRENT-LIABILITIES> 0
<BONDS> 1,125,900
<COMMON> 135,700
0
0
<OTHER-SE> 786,100
<TOTAL-LIABILITY-AND-EQUITY> 4,979,200
<SALES> 4,918,700
<TOTAL-REVENUES> 5,004,300
<CGS> 4,156,900
<TOTAL-COSTS> 4,156,900
<OTHER-EXPENSES> 13,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83,000
<INCOME-PRETAX> 293,600
<INCOME-TAX> 124,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168,600
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 0
</TABLE>
